Friday, 23 January 2015 00:00

Large Portion of Antitrust Multidistrict Litigation in FL Dismissed, Refiled by Plaintiffs

Judge Gregory Presnell  in Florida has dismissed a large portion of a Federal lawsuit in multidistrict litigation court accusing State Farm Mutual Automobile Insurance Co. and 40 other insurers of conspiring to suppress reimbursement rates for vehicle damage repair costs. However, the plaintiffs have already refiled claims that were dismissed without prejudice.

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John Eaves of Eaves Law Firm in Mississippi, the lead lawyer for the plaintiffs, said this was not a surprise. “We anticipated [the dismissal],” said Eaves. “This is what was done the first time we filed a complaint in Florida.”

“My interpretation is that [Judge Presnell] wanted a lot more of the actual facts and details in the complaint… instead of something so general,” Eaves told Autobody News.

However, the ruling may be a setback for hundreds of other auto repair shops alleging similar claims against insurers in the multidistrict litigation in the District Court. Shops across the country have provided Eaves with an abundance of information that he has now incorporate into the revised complaint. He said it is a longer document, much more detailed and comprehensive.

As of the date of the ruling, 22 other cases initially filed in numerous states, including Indiana, Kentucky and Virginia, are currently before Judge Presnell for coordinated pretrial proceedings.  In re Auto Body Shop Antitrust Litig., MDL No. 2557, complaints filed (M.D. Fla.).

According to the plaintiffs in the Florida action, the defendants exercise control over labor and repair costs by entering into DRPs with body shops.  In exchange for providing certain concessions of price, priority and other matters, the defendants list the shops as “preferred providers.”

However, the defendants, led by State Farm, allegedly have conspired to use the DRPs as a way to set maximum price limits on the shops’ products and services, according to the suit.

If the labor rates are deemed unacceptable, the defendants demand a lower rate, arguing the higher rate does not conform to the market rate and therefore violates the DRP, the plaintiffs argued.

Further, failure to comply with the defendants’ demands results in removal from the preferred-provider program or improper “steering” of customers away from the “noncompliant” auto body shop’s business, the plaintiffs say.

But Judge Presnell ruled that the plaintiffs offered no details about how or when the insurers entered into the alleged price-fixing agreement.

The fact that a number of defendants have indicated an unwillingness to pay more than State Farm has to pay for parts or labor also does not, itself, violate the Sherman Act, he said.

“It is not illegal for a party to decide it is unwilling to pay a higher hourly rate than its competitors have to pay, and the fact that a number of the defendants made statements to that effect does not tip the scales toward illegality,” Judge Presnell wrote.

The plaintiffs also failed to establish that the defendants may have engaged in boycotting activity by allegedly steering customers away from noncompliant shops, according to the ruling.

“There is no allegation that any defendants refused to allow any of its insureds to obtain a repair from such a shop or refused to pay for repairs performed at such a shop,” the judge said.

The plaintiffs also cannot move forward with their claim for tortious interference with business relations, he said, because the defendants had an existing financial interest in the relationship between their insureds and the plaintiffs and were therefore “privileged to interfere in that relationship.

“For tortious interference to be unjustified, the interfering defendant must be a third party, a stranger to the business relationship,” he said.

Judge Presnell did, however, permit the plaintiffs to continue with their claim for conversion, which alleges the defendants failed to make full payment for certain labor and material costs.

Other defendants in the action include 21st Century Centennial Insurance Co., Allstate Fire & Casualty Insurance Co., Geico General Insurance Co. and Hartford Accident & Indemnity Co.

The claims brought by the plaintiffs included: quantum meruit, unjust enrichment, quasi-estoppel, tortious interference with business relations, conversion, and violations of the Sherman Act in regards to price-fixing. All but one count, quasi-estoppel, was dismissed without prejudice, meaning that plaintiffs will be able to file an amended pleading reasserting the counts by Feb. 10.

The quasi-estoppel (count III) was dismissed with prejudice, meaning that it will not be allowed to be refiled. The term is described by Florida courts as “… a legal doctrine, applicable in certain limited circumstances, which provides that ‘[a] party cannot, either in the course of litigation or in dealings, occupy inconsistent positions.’”

Another way to think about quasi-estoppel is: Someone (#1) thinks something (A) is true and takes action based on that belief, someone else (#2) says “A is not true (even though #2 previously said it was)” and that causes #1 to do something that results in harm (i.e. business loss). If it turns out that A was true to begin with, #2 is guilty of quasi-estoppel.

The plaintiffs sought to have quasi-estoppel applied in regard to repair estimating databases. According to court documents, “The Plaintiffs allege that the Defendants ‘have relied upon and asserted the validity/authority of the databases... when it has been to their respective advantage’ but that, in other instances, the Defendants ‘have refused to compensate and/or fully compensate Plaintiffs for materials expended and work performed, including labor and labor rates, upon reliance of these very same guides, claiming that they are unnecessary to complete the work at hand.’”

Court documents stated that the Plaintiffs sought to have the Defendants stopped from denying the applicability and reasonableness of the repair databases; however, the Florida court did not find this to be a cause for action.

“The Court’s order is a significant victory for Farmers and the other defendants,” wrote the law firm Weil, Gotshal & Manges LLP, representing Farmers’ affiliates, in an article posted on Weil’s website. “Though the Court dismissed all but one claim—for quasi-estoppel—without prejudice, it strongly suggested that plaintiffs would have difficulty remedying their remaining claims in an amended complaint. Additionally, this decision dismissed claims based on allegations similar to those contained in approximately 20 other cases in a consolidated multi-district litigation pending in Florida, entitled In re Auto Body Shop Antitrust Litigation.”

The Weil team represents Farmers’ affiliates 21st Century Centennial Insurance Company, 21st Century Indemnity Insurance Company, Foremost Insurance Company Grand Rapids, Michigan, Bristol West Insurance Company, and Security National Insurance Company.

James Burns, co-leader of the antitrust practice at Dickinson Wright PLLC, told Autobody News that the Court’s most recent ruling is a significant victory for the defendants, and one that could potentially lead to a quick end to the proceeding.

“While the Court has granted plaintiffs leave to amend several of their claims, if the proceeding is going to continue they will need to demonstrate that the infirmities identified by the Court in the recent ruling have been remedied in an amended complaint,” said Burns, who is not involved in the MDL proceeding.

“Whether that will be possible remains to be seen. In any event, any amended complaint will likely be met by a renewed motion to dismiss by the defendants, setting up another significant ruling by the Court this Spring or Summer.”

When Autobody News spoke to Eaves on Jan. 22, he was in Washington D.C. to meet with members of the House and Senate regarding the introduction of a bill to enforce the 1963 Consent Decree. This was a follow up to his earlier trip in September 2014 when Eaves and more than 65 body shop owners visited the Capital to begin these discussions.

“My goal here [in Washington D.C.] is to understand what the best way is to present this in the new congress and decide who is going to take the lead on it and articulate the message,” said Eaves.

He said the objective of the lawsuit and the bill is the same. “At the end of the day it’s to protect consumers by protecting the shops that are loyal to the consumers that want to do the repair the right way and the best way and not let the insurance companies cut corners that tie their hands.”

*Part V. Conclusion in the court documents incorrectly states that Count IV of the Amended Complaint is dismissed with prejudice. It should have read Count III, Quasi-Estoppel, is dismissed with prejudice. 

 

Click HERE to read more coverage of the Antitrust Multidistrict Litigation by Autobody News.

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